What are Chart Patterns in Forex?
Chart Patterns
Forex Trading Glossary
Quick Answer: Chart patterns are recognizable formations in price action that suggest future price movements. They include reversal patterns (head and shoulders) and continuation patterns (triangles).
What Are Chart Patterns?
Chart patterns are recurring price structures that reveal shifts in supply and demand. Traders use them to anticipate whether a trend is likely to continue or reverse.
Categories of Patterns
- Continuation: Formations such as ascending triangles or flags that pause a trend before it resumes.
- Reversal: Setups like head and shoulders, double tops, or hammers that highlight exhaustion.
- Neutral: Consolidations that require additional confirmation before direction emerges.
Process Over Prediction
Patterns signal probabilities, not certainties. Combine structure with volume, momentum, and higher timeframe context before committing capital.
Best Practices
- Define invalidation levels in advance so a failed pattern leads to a controlled loss.
- Use multi-timeframe analysis to ensure smaller patterns align with the broader trend.
- Document outcomes in a trading journal to refine which setups work best for you.
- Integrate risk management so a string of failed patterns does not damage your account.
Learn More About Forex Trading
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